Senior man arriving at hospital

What is the best prescription for our health care system?

In this series of articles, our authors explore the factors behind increasing health care costs in the US, from excess profits to a higher volume of more expensive tests and services. While excess profits is a factor, the series also finds that trying to curb profits could also limit the industry’s willingness to absorb research and development costs.

A multipronged approach that focuses on underlying costs — from encouraging more visits to primary care physicians, to stronger coordination between major players in the health care industry, to encouraging more value-based care options — could offer the most promising potential for mitigating health care costs.

Part I: Excess profits

While profits do play a role, a wide range of factors contribute to higher health care costs in the US, not the least of which is the need to fund a certain amount of risk in research and development. Any effort to align cost and outcome may have an adverse impact on the industry’s willingness to absorb risk.

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Part II: Volume

Higher consumption of health care services by US residents plays a leading role in driving higher net health expenditures. To address this, health care providers may want to look for ways to encourage consumers to opt for more primary care visits before they seek more expensive elective services.

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Part III: Costs

While the federally operated Medicare program can regulate prices by leveraging size and scale, the system of private — and largely employer-provided — health insurance has been unable to control prices in the same way due to a lack of consolidation, transparency and coordination.

Coming soon

Part IV: Solutions

Limiting profits may not be the “smoking gun” solution to improve US national health care expenditure. However, utilizing a multipronged approach that focuses on underlying costs in combination with high prices may provide an answer.

Coming soon

Authors include:

  • Ravi Anupindi | Colonel William G. and Ann C. Svetlich Professor of Operations Research and Management, University of Michigan
  • Aneel Karnani | Professor of Strategy, University of Michigan
  • Alok Chatterjee | Principal, Head of Portfolio Operations, Astra Capital Management 
  • H. Mallory Caldwell, Partner, EY-Parthenon, Ernst & Young LLP
  • Sanjay Ramaswamy, Partner, EY-Parthenon, Ernst & Young LLP
  • Arda Ural, PhD, Partner, EY-Parthenon, Ernst & Young LLP

Contributors include:

  • Thomas Morabito | Senior Director, EY-Parthenon, Ernst & Young LLP
  • Niyati Upadhyayula | Director, EY-Parthenon, Ernst & Young LLP
  • Dr. Parul Aggarwal | Director, EY-Parthenon, Ernst & Young LLP
  • Austin T. O’Grady | Senior, EY-Parthenon, Ernst & Young LLP